Business Set Up in Philippines

Sole Proprietorship

A single natural person operates a sole proprietorship. The owner’s liability is unlimited as the business does not have a separate legal entity of its own and is distinct from its owner.

Partnership

A partnership is created by partners entering into a contract. Two or more partners bind themselves to contribute money, property, and industry in the partnership structure to undertake commercial activities and to generate profits that will be distributed among the partners as per their profit-sharing ratio. A partnership has a separate legal personality of its own however, the partners hold an unlimited liability against the debts and obligations of the partnership.

Corporations

A corporation in the Philippines is similar to a Limited Liability Company (LLC). Foreigners can register a corporation based on the prevailing laws of the corporation’s incorporation by foreigners. A foreigner can establish the following types of companies in the Philippines:

i. Domestic Company : A foreign company can set up an entity in the Philippines in the form of a subsidiary or a domestic corporation. It is a business entity with a separate legal personality from its stockholders. It is similar to the structure of a Limited Liability Company or a Private limited company in other countries. The minimum number of incorporators required to open a domestic company is 2 and the maximum number of incorporators can be 15. The incorporators are the original stockholders who need to sign the articles of incorporation. Every incorporator is required to hold at least 1 share at the time of incorporation. Any combination of partnerships, associations, corporations and natural persons can be incorporators at the time of registration of the domestic corporation, which was previously limited to natural persons only.

ii. One-Person Company : Registration of a one-person company (OPC) is done by one natural person. This person is the sole incorporator, director and president of the corporation. OPC’s liability is limited to the extent of assets contributed to the company and does not extend to the personal assets of the corporation. A foreigner has been allowed to set-up an OPC, subject to the Foreign Investment Negative List. The OPC should also appoint nominee stockholders and alternate nominee stockholders and put their names in the Articles of Incorporation. These persons shall assume the responsibilities of the OPC if the main person dies. Again, the OPC also needs to appoint a Corporate Secretary or Treasurer within 15 days. The single stockholder can assume the role of treasurer in furnishing a surety bond.

iii. Branch office : To have a presence in the Philippines one can establish a branch office. A branch office does not have a separate legal entity. It is only an extension of a foreign parent company in the Philippines. The foreign company is responsible for all the liabilities of the company. A branch office is incorporated as per the laws of the foreign land in which it is incorporated. Foreign corporations are required to appoint a resident agent who shall receive correspondence on behalf of the branch office from the government departments. This resident agent can be either an individual or a domestic corporation.

iv. Representative Office : A foreign company can start by opening a representative office in the Philippines. A representative office is a foreign parent company whose liabilities are met by its parent company and which does not have permission to generate income within or outside the Philippines. A representative office only acts as a liaison office offering marketing and sales support to its parent company by conducting market research, quality control of the products related to foreign companies, etc. A representative office is not permitted to derive income or offer services to other customers. It cannot avail of any tax incentives The minimum capital required is $30,000.

v. Regional Headquarters (RHQ) : A Regional Headquarters is an administrative branch of a foreign corporation. It inspects, supervises, and supervises the activities of the branches, representative offices, and affiliates of a corporation around the world. It also acts as a communication center for all its associates. It has not been allowed to derive income and it has no separate legal entity of its own. It can train employees, source raw materials, conduct research and development, and undertake developmental projects in the Philippines.
Similar to the Representative Offices, an RHQ is required to appoint a resident agent and proof of official business address. The minimum paid-up capital for starting an RHQ is $50,000. It is not allowed to manage the operations of its parent company's branches, affiliates and affiliates. It cannot derive any income or offer services to third parties. It can solicit any business with the clients of its parent company in the Philippines. Its parent company is also prohibited from undertaking any of these activities through its RHQ.

vi. Regional Operating Headquarters (RQHQ) : The Regional Operating Headquarters (ROHQ) is an extension of its foreign parent company, which has been allowed to generate income by performing the permitted services to its head office, subsidiaries, branch offices and other affiliates around the world. It is not a separate legal entity.
Similar to the RHQ, it is also required to appoint a resident agent and proof of official business address. $200,000 is the minimum paid-up capital required for setting up an ROHQ. Apart from serving its parent company and the needs of its affiliates, it cannot solicit any business with any other entity by performing any qualifying services for them.